At the outset of mediation, the mediator has the responsibility to “promote understanding among the parties of the extent to which the parties will maintain confidentiality of information they obtain in a mediation.” Standard V(C), Model Standards of Conduct for Mediators (adopted in 2005 by the American Arbitration Association (AAA), American Bar Association (ABA), and Association for Conflict Resolution).
To start, the parties’ understanding is informed by the familiar privileges afforded for offers of compromise in direct settlement negotiations. See, e.g., Fed. R. Evid. 408 (“Evidence of . . . furnishing or offering or promising to furnish, or . . . accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount.”). Of course, as Rule 408 continues, “[t]his rule . . . does not require exclusion when the evidence is offered for another purpose[.]”
In court-annexed mediation, local court rules may define a broader scope of confidentiality for communications made in the course of the mediation. The court’s rules may require that the parties sign an agreement with confidentiality provisions designated by the rules. Such a form of Mediation Confidentiality Agreement is required, for example, in mediations conducted through the federal Southern District of New York Mediation Program. Other federal courts’ mediation programs take a similar approach. See, e.g., D.C. Civ. R. 84.9(b) (“The mediator may ask the parties and all persons attending the mediation to sign a confidentiality agreement on a form provided by the Court, but the confidentiality requirements of this section apply regardless of whether a confidentiality agreement is signed.”). The parties enter the mediation with ready-made understandings and expectations, already informed exclusively by the court’s rules.
In private mediations, however, as recognized by Model Standard V(D), “the parties may have varying expectations regarding confidentiality that a mediator should address.” Absent a court rule dictating the content and scope of the parties’ understandings and agreements concerning confidentiality, the parties “may make their own rules with respect to confidentiality, or the accepted practice of an individual mediator or institution may dictate a particular set of expectations.” Model Standard V(D).
In the private mediation of a commercial dispute under the auspices of the AAA, pursuant to section M-1 of the AAA Commercial Arbitration Rules and Mediation Procedures, the parties “shall be deemed to have made [the Commercial Rules’] procedural guidelines” for mediation “a part of their agreement,” unless otherwise agreed in writing. Section M-10 of the AAA Commercial Rules thus imposes by default contractual obligations to maintain the confidentiality of a defined range of communications made in the mediation. Section M-11 of the AAA Employment Arbitration Rules and Mediation Procedures provides a similar, contractual confidentiality commitment for employment mediations administered by the AAA.
The contractual obligation of confidentiality created by these institutional rules does not extend to all communications made in the course of the mediation, but focuses specifically on “(i) [v]iews expressed or suggestions . . . with respect to a possible settlement . . . , (ii) [a]dmissions in the course of the mediation . . . , (iii) [p]roposals . . . or views [of] the mediator, or (iv) [t]he fact that a party had or had not indicated willingness to accept a proposal for settlement made by the mediator.” AAA Commercial Rules § M-10(i)–(iv); AAA Employment Rules § M-11(i)–(iv). By default, the parties in AAA mediation agree by these rules that they “shall not rely on, or introduce as evidence in any arbitral, judicial, or other proceeding the [foregoing enumerated categories of information] unless agreed to by the parties or required by applicable law[.]”
To enlarge the confidentiality obligations imposed by default by any applicable institutional rules, or to make their own rules for private mediation, the parties—often at the mediator’s suggestion—may enter into their own form of written mediation agreement with an all-encompassing, contractual confidentiality clause. As an example, a form of Mediation Agreement suggested by the Judicial Arbitration and Mediation Service (JAMS) includes a provision that “[a]ll statements made during the course of the mediation are privileged settlement discussions, and are made without prejudice to any party’s legal position, and are inadmissible for any purpose in any legal proceeding.”
When such an agreement is suggested by the mediator, the parties typically sign it as a matter of course. Of course, the overriding procedural objective is to promote candid mediation discussions to the maximum extent possible and to gain finality, so that whatever is said and done in mediation—settlement or not (save for a settlement agreement)—stays in mediation, never again to haunt anyone in any further legal proceedings. Everyone agrees in advance to foreclose contractually the prospect that, after the mediation, a party might seek to avoid a mediated settlement agreement, or might take legal action, based on anything said or done (save for the execution of a term sheet) within the rarified confines of mediation.
If all goes as hoped and planned in the mediation, the scope of mediation confidentiality will never matter. If a settlement agreement is attained, everyone moves on, welcoming the closure or at least accepting the resolution. No one will care a moment further what was said and done back in the mediation, beyond the signed term sheet. Or if the mediation ends in impasse, with a mutual understanding that disagreement persists on settlement terms, everyone now knows that contested proceedings are indeed necessary. They get on with them, without further regard in the proceedings for whatever transpired back in the mediation.
But what if, contrary to plan, a party comes to believe that she was badly misled during the mediation—by her adversary, by its counsel, by her own counsel, or even by the mediator—about facts material to her settlement decision, and now she has second thoughts about the term sheet she signed? What if a party comes out of mediation believing that another mediation participant engaged in some form of legally significant misconduct during the mediation session itself?
If things fall apart, a broad confidentiality agreement adopted at the outset might not serve all parties’ interests with the same mutuality that it seemed to advance beforehand. A mediation party’s interests in absolute confidentiality might change, depending on what actually ends up being said and done in the mediation. As Jeff Kichaven warns in his aptly titled article, “Beware The ‘Standard’ Mediation Confidentiality Agreement,” Law360 (Aug. 17, 2016).
To be sure, an agreement to the effect that “all communications made in the mediation are inadmissible for any purpose in any legal proceeding” is a widely accepted best practice, and with good reason. See, e.g., Facebook, Inc. v. Pac. Nw. Software, Inc., 640 F. 3d 1034, 1041 (9th Cir. 2011) (broad mediation confidentiality agreement precluded introduction, in support of claims of fraudulent inducement of mediated settlement agreement, of “any evidence of what Facebook said, or did not say, during the mediation”).
It is worth revisiting exactly what might be gained—and what might be given up—by the typical, all-encompassing form of mediation confidentiality agreement.
The scope of confidentiality accorded to mediation communications by state statutes varies enormously. The Uniform Mediation Act (UMA), initially promulgated by the Uniform Law Commission in 2001, has been adopted verbatim or in varying forms in the District of Columbia, Georgia, Illinois, New Jersey, Ohio, and eight other states (Hawaii, Idaho, Iowa, Nebraska, South Dakota, Utah, Vermont, and Washington). Section 4 of the UMA provides a general rule of privilege against discovery and the admissibility of mediation communications. However, the UMA’s general rule of privilege is subject to several exceptions.
Even though the UMA has been adopted in only 13 jurisdictions, its provisions serve as a useful reminder, nationwide, of when it may come to matter whether or not the parties have adopted a broad, contractual mediation confidentiality agreement.
First and foremost, pursuant to section 6(b)(3)(B) of the UMA, the general privilege against disclosure or use of mediation communications provided by section 4 is not available for assertion by a mediation party in a legal proceeding “to prove a claim to rescind or reform or a defense to avoid liability on a contract arising out of the mediation,” if the proponent of disclosure shows that the need for the mediation communication “substantially outweighs” confidentiality interests.
The exception to mediation confidentiality carved out by UMA section 6(b)(3)(B) may open the door, upon a showing of need, for disclosure and use of mediation communications to prove a wide range of defenses to a mediated agreement, such as fraudulent inducement or duress. If the UMA had provided the rule of decision in Facebook, and if parties had not entered into a broad mediation confidentiality agreement, the defense to avoid liability on the mediated settlement agreement asserted there—fraudulent inducement—might well have been litigable.
Statutes of a number of states that have not adopted the UMA may permit disclosure and admission of mediation communications whenever the enforceability of a mediated agreement is at issue in a subsequent legal proceeding. For example:
If the applicable state law controlling the admissibility of evidence of communications in private mediations is no more than an analogue of Federal Rule of Evidence 408, as in New York, mediation communications might be held to be admissible for any purpose other than proving, in the words of Rule 408, “liability for or invalidity of the claim or its amount.” See, e.g., N.Y. C.P.L.R. 4547 (compromise offers “shall be inadmissible as proof of liability for or invalidity of the claim or the amount of damages”; however, “the exclusion established by this section shall not limit the admissibility of such evidence when it is offered for another purpose”).
An assertion that a mediated agreement was fraudulently induced by statements in the mediation itself, for example, is not advanced for the purpose of contesting liability on the claim that brought the parties to mediation in the first place. Instead, it is asserted to avoid the contract allegedly made in the mediation, and under rules similar to Federal Rule of Evidence 408, evidence of what was said and done in the mediation would ordinarily be admissible in these circumstances.
Section 6(a)(6) of the UMA excepts from privilege for anyone who participated in the mediation, save for only the mediator, communications sought or offered to prove or disprove a claim or complaint of “professional misconduct or malpractice” based on conduct during a mediation filed against any other mediation participant. And section 6(a)(5) of the UMA withdraws the privilege for anyone in the mediation, including the mediator, of a mediation communication sought or offered to prove or disprove a claim or complaint of professional misconduct or malpractice filed against a mediator.
With their focus on professional misconduct and malpractice, these exceptions of UMA sections 6(a)(5) and (6) point most directly to the lawyers’ adherence throughout the mediation to the Rules of Professional Conduct (which might also apply to mediators, should they stray into the practice of law) and to the compliance of lawyers and mediators with requisite standards of care. See, e.g., Model Standards, Note on Construction (“the fact that these Standards have been adopted by the respective sponsoring entities, should alert mediators to the fact that the Standards might be viewed as establishing a standard of care for mediators”).
Of course, no ethical lawyer or mediator would contend that a mediation confidentiality agreement facially requiring absolute secrecy of all mediation communications could operate as a prospective waiver of malpractice claims based on events in the mediation. See, e.g., Model Rule of Professional Conduct 1.8(h)(1) (“lawyer shall not . . . make an agreement prospectively limiting the lawyer’s liability to a client for malpractice”). But there may be some virtue in including the proviso “except as required by law” if one chooses to recommend a blanket mediation confidentiality agreement.
Issues of mediation confidentiality can raise complex conflicts of law issues, given the multistate character of many mediations and the wide differences among the states’ mediation confidentiality rules. A designation in the mediation confidentiality agreement of a particular state’s law to govern confidentiality issues should be undertaken with care and with an eye toward the location of any post-mediation litigation. An application of foreign law chosen by contract might prove to be a bridge too far for the forum-state court, if there are significant differences between the scope of privilege afforded by the law of the forum state and that chosen by the parties. See Larson v. Larson, 687 F. App’x 695, 706 (10th Cir. Apr. 27, 2017) (unpublished) (applying law of forum state, Wyo. Stat. § 1-43-103(c)(v), to rule that mediation communications were admissible, despite mediation agreement providing that “[a]ll communications, whether oral or written, made in the course of the mediation process . . . are confidential by this agreement and the Colorado Dispute Resolution Act, C.R.S. 13-22-301”).
In almost all cases, an all-encompassing mediation confidentiality agreement will indeed be the best practice. It bespeaks a measure of mutual trust and confidence, essential to effective mediation. Questioning out loud such a commonplace provision at the outset might be taken as raising doubts concerning one’s commitment to candor and finality.
But the alternatives should be borne in mind, in consideration of this particular client’s best interests in dealing with this particular adversary. Is a promise of absolute secrecy always and invariably the best way to enter mediation?
